Vinyl chloride monomer Prices, markets & analysis
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Vinyl Chloride Monomer Overview Transcript
Vinyl chloride monomer, also known as VCM, is an intermediate in polyvinyl chloride (PVC) production and is largely integrated, with only a small merchant market outside of contract agreements.
About 99% of VCM is used in the production of downstream PVC, which is the main driver of VCM prices.
Other drivers include movements in ethylene and chlorine costs as well as events in the wider chlor alkali chain, as producers need to balance the electro chemical unit in order to make the business profitable.
The economy is also a key driver for VCM consumption, as the PVC market is strongly linked with construction activity and GDP.
In the global VCM market, trading activity has depended on the outcome of PVC negotiations, which have been largely unsuccessful for producers, as poor conditions in the construction market continue to cap potential increases and producers’ efforts to pass higher ethylene costs.
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Asian vinyl chloride monomer (VCM) prices were on an uptrend in the period of 3 January-21 February, rising from an average of $870/tonne CFR (cost & freight) NE (northeast) Asia to an average of $925/tonne CFR NE Asia. The prices reached a one-year high of $930/tonne CFR NE Asia on 7 March.
The price movement of VCM closely tracked key downstream polyvinyl chloride (PVC) prices, which saw a slight uptick due to high feedstock ethylene prices. In addition, the already tight VCM supply in the region was even more limited due to turnarounds in February and March, and closely monitored plant operating rates.
However, VCM prices subsequently experienced downward pressure from PVC makers who reduced their VCM buying ideas as PVC prices softened due to weak end-user demand in March. VCM prices were on a downtrend since 14 March.
Looking forward, most market players expect VCM prices to continue to soften due to soft PVC prices and persistently weak demand. However, regional supply of VCM is inherently short, hence any reduction in VCM prices is likely to be gradual rather than steep.
Updated to Q1 2014
European vinyl chloride monomer (VCM) spot prices have remained steady either side of $700/tonne FOB (free on board) NWE (northwest Europe) between August and November 2013. This is despite some fluctuation in upstream ethylene costs. The cost ratio of ethylene to VCM is around 50%. However, this is because the majority of VCM business is captive as the systems are integrated and there have been no reports of any merchant trades over this period to either reflect or not the fluctuation in feedstock costs. In addition, vinyl producers said if there is any need to purchase on the merchant market, it makes more economic sense to buy in upstream ethylene dichloride (EDC) rather than purchase VCM to balance out their own system and to support downstream demand. This is because EDC price levels are more competitive than VCM, as are logistical costs.
Updated to mid-November 2013
US spot vinyl chloride monomer (VCM) prices on an FOB (free on board) basis out of the US Gulf (USG) declined steadily from mid-August to mid-November.
Ethylene values pulled back sharply in September and record lows were recorded in the feedstock ethylene markets. Spot VCM prices were dragged down by sagging feedstock pricing and divergent buy and sell price ideas in the export polyvinyl chloride (PVC) market.
Activity in the spot US VCM market has been very limited as most VCM is integrated and used captively in the production of PVC.
Further depressing market sentiment, the US housing sector saw another decline in builder confidence in October. US home builders are less confident about market prospects, with construction industry leaders blaming labour costs and uncertainty about federal fiscal policy.
Updated to mid-November 2013
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